This Just In:
Price Controls Cause Shortages

Ann Coulter

February 2, 2001

Another "Dog Bites Man" story has once again taken the
American press corps by surprise.

California's electricity crisis is treated in the media as if it were some
sort of natural disaster, like a hurricane. But the only fact of nature operating here is
the hard-and-fast rule that whenever you come across a screw-up this big, you know the
government is behind it.

The California Legislature created this problem about five years ago when it
deregulated the wholesale market for electricity but fixed prices at the retail level, a
policy that has made Cuba the happy, prosperous country that it is today.

Needless to say, eventually wholesale prices soared, but the utilities were prohibited
from passing their increased costs onto consumers. Buy high, sell low! (Isn't that what
they teach you in business school?) Since the California utilities are about to go
bankrupt on the governmentally imposed "Buy high, sell low" strategy, no one
will sell them electricity. So now there's no electricity in California  but at
least it's cheap!

You are probably wondering how it is that multibillion-dollar corporations with highly
paid business school graduates populating their corporate risk-management departments
could have failed to anticipate price fluctuations in the electricity market and entered
into long-term contracts.

The answer is: A screw-up this big could only be caused by the government. California
actually prohibited utilities from entering into long-term contracts. (The California
Legislature came up with many other idiotic ways to mess up the electricity market; this
is just the highlight reel.) If California utilities had relied on evil, blood-sucking
hedge-fund managers rather than the California Centralized Committee to Fix Prices and
Plan Markets, they'd have plenty of electricity now.

To summarize: The California Legislature fixed prices at which electricity could be
sold to consumers and prohibited utilities from entering into long-term contracts to hedge
the electricity market, leading like night into day to wild fluctuations in the price of
electricity, but the utilities couldn't recoup their costs because the government had
fixed prices in the retail market.

In the mainstream media, this is known as "deregulation."

In point of fact, the California electricity crisis resulted from government policies
that are the opposite of deregulation, the antimatter of deregulation, as antithetical to
deregulation as the rule of law is to Bill Clinton.

If the California Legislature had helped the Soviet Union with its transition from
communism to a market economy, they'd be experiencing their 84th year of "bad
weather" wrecking the crops again this year. Instead, only California utilities had a
"bad weather" year. The utilities signed on to what was a politically attractive
package at the time, and now it turns out they stepped on a rake and the rake has hit them
in face. Dog bites man!

It is remarkable that it is this difficult for so many people to grasp the concept of a
free market at this point in history. It's never going to get any easier than this.

Only a little over a decade ago the centralized planning of the Eastern Bloc was
exposed as having created a squalid, poverty-stricken abyss. Meanwhile, corrupt
running-dog lackeys of the capitalist system managed to produce a society in which the
poorest Americans have refrigerators, televisions, VCRs, telephones, radios and 67
varieties of orange juice.

But no matter how many good products at low prices capitalism manages to provide, and
no matter how spectacular the failures of government intervention are, some segment of the
population continually lists toward distributing goods and services on the old Soviet
bread-distribution model.

Evidently, the free market is an incredibly counterintuitive concept. People have to be
constantly reminded how excellent the market is at distributing goods and services.

The basic idea of a free market is that the consumer and seller enter directly into
mutually beneficial transactions. The consumer has the best information about what he
wants and how much he is willing to pay; the seller has the best information about what he
can provide and what it will cost him. That's how we end up with great stuff like
reasonably priced Chia pets in the shape of Jerry Garcia's head.

The government bureaucrats rallying cry is: "Insert a middleman!" They simply
cannot shake the conviction that they are in possession of the millions of constantly
changing pieces of information that the market processes continually and effortlessly. If
we ever let these bureaucrats run free, stores everywhere would run with the smooth
Austrian precision of the Department of Motor Vehicles.

Naturally, the California government's solution to a problem created by the government
is: more government! California voters ought to say what the Democratic Party is now
gently trying to convey to Bill Clinton  thanks, but you've already done enough.